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Investor Presentation Third Quarter 2019
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. In addition, representatives of the Bank may include forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, statements made in this document, the Management’s Discussion and Analysis in the Bank’s 2018 Annual Report under the headings “Outlook” and in other statements regarding the Bank’s objectives, strategies to achieve those objectives, the regulatory environment in which the Bank operates, anticipated financial results, and the outlook for the Bank’s businesses and for the Canadian, U.S. and global economies. Such statements are typically identified by words or phrases such as “believe,” “expect,” “foresee,” “forecast,” “anticipate,” “intend,” “estimate,” “plan,” “goal,” “project,” and similar expressions of future or conditional verbs, such as “will,” “may,” “should,” “would” and “could.”
By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved.
We caution readers not to place undue reliance on these statements as a number of risk factors, many of which are beyond our control and effects of which can be difficult to predict, could cause our actual results to differ materially from the expectations, targets, estimates or intentions expressed in such forward-looking statements.
The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; changes in currency and interest rates; increased funding costs and market volatility due to market illiquidity and competition for funding; the failure of third parties to comply with their obligations to the Bank and its affiliates; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; changes in laws and regulations or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; changes to our credit ratings; operational and infrastructure risks; reputational risks; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services; our ability to execute our strategic plans, including the successful completion of acquisitions and dispositions, including obtaining regulatory approvals; critical accounting estimates and the
effect of changes to accounting standards, rules and interpretations on these estimates; global capital markets activity; the Bank’s ability to attract, develop and retain key executives; the evolution of various types of fraud or other criminal behaviour to which the Bank is exposed; disruptions in or attacks (including cyber-attacks) on the Bank’s information technology, internet, network access, or other voice or data communications systems or services; increased competition in the geographic and in business areas in which we operate, including through internet and mobile banking and non-traditional competitors; exposure related to significant litigation and regulatory matters; the occurrence of natural and unnatural catastrophic events and claims resulting from such events; and the Bank’s anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank’s business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank’s financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank’s actual performance to differ materially from that contemplated by forward-looking statements. The Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank’s results, for more information, please see the “Risk Management” section of the Bank’s 2018 Annual Report, as may be updated by quarterly reports.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2018 Annual Report under the headings “Outlook”, as updated by quarterly reports. The “Outlook” sections are based on the Bank’s views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s shareholders and analysts in understanding the Bank’s financial position, objectives and priorities, and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf. Additional information relating to the Bank, including the Bank’s Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC’s website at www.sec.gov.
TABLE OF CONTENTS
Scotiabank Overview 4
• Canada’s International Bank 5
• Well-Diversified and Profitable Business 6
• Medium-Term Financial Objectives 7
• Why Invest in Scotiabank? 8
• Acquisition & Divestiture Activity 9
• Increasing Scale, Improving Focus, Lowering Risk 10
• Track Record of Earnings and Dividend Growth 12
• Strong Capital Generation 13
• Strong Progress in Digital Banking 14
• Environmental, Social & Governance (ESG) 15
Appendix 1: Business Line and Financial Overview 17
• Financial Performance 18
• Canadian Banking 19
• International Banking 26
• Global Banking and Markets 29
• Credit Performance by Business Lines 31
• Historical PCL Ratios on Impaired Loans 32
• Canadian Retail: Loans and Provisions 33
• International Retail: Loans and Provisions 34
• Wholesale Funding 35
Appendix 2: Key Market Profiles 36
Appendix 3: Canadian Housing Market 43
Appendix 4: Additional Information 50
Appendix 5: Energy Exposure 52
Contact Information 54
Scotiabank Overview
Canada’s International Bank Top 10 Bank in the Americas1,2
LEADING BANK IN THE AMERICAS
Full-Service
Canada • Mexico
Peru • Chile
Colombia • Caribbean
Uruguay
Wholesale Operations
USA • UK • Hong Kong
Singapore • Australia
Ireland • China • Brazil
South Korea • Malaysia
India • Japan
Earnings by Geography3,6
Scotiabank3
FY 2019
Q3 YTD
Change
YTD/YTD
Revenue $23.2B +9%
Net Income $7.0B +3%
Return on Equity 13.9% -130 bps
Operating Leverage4 -1.2% n.a.
Productivity Ratio 52.7% +160 bps
Total Assets $1.1T +12.7%
Ranking by Market Share5
Canada #3
USMCA USA Top 10 Foreign Bank
Mexico #6
Peru #3 Chile #3
Colombia #6
Americas 7th largest bank by assets1
9th largest bank by market capitalization1
Europe
Asia
1 Source: Bloomberg August 21, 2019; 2 By assets and market capitalization; 3 Figures adjusted for Acquisition and divestiture-related amounts, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and net loss on divestitures and related costs; 4 Exclude employee benefits re-measurement credit of $203MM pre-tax, $150MM after-tax in Q1/18; 5 Ranking based on market share in loans as of June 2019 for PACs (incl. M&A), as of May 2019 in Canada for publically traded banks; 6 For the nine months ended July 31, 2019
Canada
U.S.A
PAC
C&CA
PAC
Americas (~90%)
2018 Bank of the Year
Latin America and the
Caribbean by Latin Finance
Other
5
50%
9%
24%
9% 8%
Canada
50%
U.S.
9%
Mexico
7%
Peru
9%
Chile
6%
Colombia
2%
C&CA*
9%
Other
8%
Canadian Banking
P&C
38%
International
Banking P&C
32%
Global Banking and
Markets
17%
Global
Wealth
Management
13%
Well-Diversified and Profitable Business
GREATER SCALE, GREATER FOCUS
Earnings by Business1,2,3 Earnings by Geography1,2
1 Net income attributable to equity holdersor for the nine months ended July 31, 2019; 2 Figures adjusted for Acquisition and divestiture-related amounts, including integration and amortization costs related to current acquisitions, amortization
of intangibles related to current and past acquisitions and net loss on divestitures and related costs; 3 Excluding Other segment
Diversified by business and by geography, providing stability and lowering risk
18.7%
13.9% 13.1% 13.9%
Canadian Banking International Banking Global Banking andMarkets
All Bank
* Caribbean and Central America
2019 YTD
EARNINGS MIX
$6.9B3
2019 YTD
EARNINGS MIX
$6.9B3
6
Per
Personal &
Commercial
Banking
70%
Wholesale
Banking
17%
Wealth
Management
13%
7
Medium-Term Financial Objectives1
METRICS OBJECTIVES Q3/19 RESULTS2
(YTD/YTD Change)
ALL BANK
EPS Growth 7%+ Flat
ROE 14%+ 13.9%
Operating Leverage3 Positive (1.2%)
Capital Strong Levels 11.2% (11.7% pro-forma announced divestitures)
Dividend Payout Ratio 40%-50% 48.5%
BUSINESS LINE
CANADIAN BANKING
Net Income Growth 7%+ +1.7%
Productivity Ratio <49% 49.4%
INTERNATIONAL BANKING
Net Income Growth4 9%+ +15.0%
Productivity Ratio <51% 50.5%
1 3-5 year objectives. 2 Figures adjusted for Acquisition and divestiture-related amounts, including integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and net loss on divestitures and related costs; 3 Excludes employee benefits re-measurement credit of $203MM pre-tax, $150MM after-tax in Q1/18; 4On a constant dollar basis
Why Invest in Scotiabank?
Canada’s international bank
and a top 10 bank in the
Americas
Diversified exposure to high
quality growth markets
Increasing scale and market
share in key markets
• Leading Canadian banking franchise
• Leading bank in the Pacific Alliance growth markets of Mexico, Peru, Chile and Colombia
• Earnings growth in personal & commercial, wealth, and wholesale businesses
• Gaining market share in key markets of Canada, the U.S. and the Pacific Alliance countries. Lowering operational risk with more focused footprint
• Top 3 bank in Canada, Chile and Peru
• Increasing scale in Wealth Management and Pacific Alliance with $7B of strategic acquisitions since 2018
• Unique footprint provides diversification with growth
• Strong balance sheet, capital and liquidity ratios
• Attractive dividend yield, return on equity and valuation
• > 80% of earnings from core personal and commercial banking businesses. > 80% of earnings from 6 key markets
• Exited 21 countries and 11 businesses since 2013
• Strong Canadian risk management culture – building stronger capabilities for AML and cybersecurity
Improving quality of earnings
while reducing risk profile
• Leading levels of technology investment supports digital banking strategy. Increasing digital sales and adoption with clear targets
• Well positioned in the Pacific Alliance to leverage technology, risk management, and funding versus local and global competitors
• Named to Top 25 ”World’s Best Workplaces” (2018)
Enhancing competitive
advantage in technology
and talent
8
Acquisition & Divestiture Activity Acquisitions focused on gaining scale and improving business mix
Divestitures focused on smaller markets and less attractive operating environments
9
Acquisitions
Divestitures/Exits
2014 2015 2016 2017 2018 2019
CI Financial
* Announced and pending
• 9 Leeward Islands
Countries*
Co
un
trie
s
Bu
sin
esses
MD Financial,
Jarislowsky Fraser
Banco Progreso (Dominican Republic)
Russia Egypt
Turkey
Haiti
UAE
Vietnam
Taiwan
Pension & Insurance (Dominican Republic)
Thailand* ($3.0B)
PR/USVI* ($0.5B)
El Salvador*
France
CrediScotia (Jamaica)
JPMorgan Chase
Credit Card Portfolio
Cencosud (Chile)
Aurion Capital
Citibank (Peru)
Citibank (Panama)
Citibank (Costa Rica)
Canadian Tire
Financial
Services
BBVA (Chile)
Citibank (Colombia)
Cencosud (Peru)
RoyNat Leasing Hollis Wealth
Insurance* (Jamaica, Trinidad & Tobago)
Pension* (Colombia)
Canada
Adds wealth management assets of $96B.
Adds 110,000 potential primary customers.
Expands wealth management offering.
Chile
Doubles market share.
Creates 3rd largest bank.
Further diversifies business.
Peru Creates 2nd largest bank in credit cards.
Further diversifies business.
Colombia Creates market leader in credit cards.
Dominican
Republic
Doubles customer base.
Creates 4th largest bank.
Increasing Scale, Improving Focus, Lowering Risk1 Gaining scale in key markets to drive earnings growth, improve earnings quality and reduce risk
INCREASING SCALE, IMPROVING FOCUS
Increasing Scale with Strategic Acquisitions (2017-2019)
10
1 5-year period 2014-2019
Increasing Scale, Improving Focus, Lowering Risk1 Gaining scale in key markets to drive earnings growth, improve earnings quality and reduce risk
INCREASING SCALE, IMPROVING FOCUS
Reducing Risk Profile
Improving Earnings Quality
Increased Wealth Management assets under management
by 44%2 to $297B
Targeting Wealth Management earnings contribution to All-
Bank earnings of 15% over the medium-term
Establishing Global Wealth Management as a standalone
reporting division in Q1/20
Reduced wholesale funding (% of assets) from >29% in 2014 to
23% today
2013 2019
54 countries
33 countries
Exited 21 countries since 2013 with either small scale, higher
operational risk, or low returns, including:
• Middle East: Turkey, Egypt, UAE
• Asia: Thailand, Vietnam, Taiwan
• Central America: Guatemala, El Salvador
• Caribbean: Haiti, Puerto Rico, USVI, and 9 of the Leeward
Islands
• Europe: Russia, France
• Capital has been mainly redeployed into Canada and the Pacific
Alliance countries and through share buyback program
Exited 11 non-core businesses including:
• Pension benefits and administration businesses (Dominican
Republic, Colombia) and lease finance (Canada)
1 5-year period 2014-2019; 2 Q4 2017 to Q3 2019
11
Gaining Market Share (Total Loans)
Canada
Mexico
Chile
Peru
Colombia
Q3/14
Q3/19
0 2 4 6 8 10 12 14 16 18 20 %
$1.96
$3.49
09 10 11 12 13 14 15 16 17 18 19
Strong Track Record of Earnings and Dividend Growth
1 Reflects adoption of IFRS in Fiscal 2011 2 Excludes notable items for years prior to 2016. For 2016 onwards, results adjusted for acquisition-related costs including Day 1 PCL impact on acquired performing loans, integration and amortization costs related to current acquisitions and amortization of intangibles related to current and past acquisitions. 3 As of July 31, 2019
Stable and predictable earnings with steady increases in dividends
Earnings per share (C$)1,2
$3.05
$7.11
08 09 10 11 12 13 14 15 16 17 18
Dividend per share (C$)
+9%
CAGR
+6%
CAGR
Total shareholder return3
INCREASING SCALE, IMPROVING FOCUS 12
3.4%
8.8%
12.0%
8.4%
11.5% 11.8%
5 Year 10 Year 20 Year
Scotiabank Big 5 Peers (ex. Scotiabank)
CET1 Ratio
Strong Capital Levels
11.4% 11.1% 11.1% 11.1% 11.2%
1.4% 1.4% 1.4% 1.4% 1.1%
1.7% 1.8% 2.1% 2.2% 2.5%
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
CET1 Tier 1 Tier 2
14.6% 14.7% 14.5%
Strong Capital Generation Clear path to higher capital ratio
14.3% 14.8%
13
+3 bps -2 bps
11.1% +33 bps -17 bps -4 bps -9 bps 11.2% ~50 bps
Q2/19 EarningsLess Dividends
RWA Impact(ex. FX)
Share Buybacks(Net of
Issuances)
PensionRe-Measurement
Puerto RicoQ3 Impact
OtherIncluding FX
Q3/19Reported
Impact ofAnnouncedDivestitures
Q3/19Pro-Forma
11.7%
Internal Generation
Strong Progress in Digital Banking Progressing well against 2018 Investor Day digital targets
1 Canada: F2017 22%, F2018 26%, Q3/19 30% PACs: F2017 13%, F2018 19%, Q3/19 27% 2 Canada: F2017 36%, F2018 38%, Q3/19 42% PACs: F2017 20%, F2018 26%, Q3/19 32% 3 Canada: F2017 17%, F2018 15%, Q3/19 13% PACs: F2017 29%, F2018 24%, Q3/19 19%
14
• Adoption grew 600
bps against Q3 of
last year
• In-branch
transactions
continued to decline
at a steady pace
Digital Retail Sales1 Digital Adoption2 In-Branch Financial Transactions3
Goal
>50%
Goal
>70%
Goal
<10%
11
15
22
28
F2017 F2016 Q3/19 F2018
+1,700 bps
26 29
33 37
F2017 F2016 F2018 Q3/19
+1,100 bps
26 23
20
16
F2017 F2016 F2018 Q3/19
-1,000 bps
• Strong progress made
across key markets;
Key highlight: Chile
surpassed the 50%
mark in Q3/19
15
Environmental, Social & Governance (ESG)
Environmental Social Governance
• Issued inaugural USD 500 million 3.5-
year Green Bond to support
renewable energy, clean transportation
and green buildings
• $8.5 billion in loans and credit facilities
to the renewable energy sector in 2018
• Established internal price on carbon,
and on-track to achieve greenhouse
gas reduction target of 10% by 2021
• Began integrating recommendations
from the Task Force on Climate-
related Financial Disclosures in 2018
and have reported to the CDP since
2004
• New approach to working at our head
office in Toronto, Canada has reduced
square feet per employee by 40%,
and expected to reduce paper use by
86%
• Launched the Scotiabank Women
Initiative to advance women-led
businesses through access to capital,
education and mentorship
• ~35% of VP+ roles and Executive
positions held by women
• $250 million committed over 10 years
to help employees adapt to the digital
economy
• Joint Lead Manager on $1 billion World
Bank Sustainable Development
Bond to support women and youth
• First Canadian bank to adopt both the
UN Global LGBTI Standards for
Business and the UN Women’s
Empowerment Principles
• Employees volunteered >370,000
hours in 2018 to local causes
• >$80 million donated to communities
in 2018 with 70% directed towards
helping young people in the community
• First financial institution in Canada to
establish a Corporate Governance
Office (2014), with a direct reporting
line to the Chair of the Board
• Updated our Human Rights
Statement in 2019, signed by our
President and CEO
• Approved robust equity ownership
requirements for directors in 2003.
These have been reviewed annually
and now include additional common
share ownership obligations
• Established an independent Chair in
2004
• Established term limits for directors
in 2011
• Established a Board diversity policy in
2013. 38% of directors are female
• Adopted strict policies on director
interlocks and overboarding, which
are reviewed annually
16
Environmental, Social & Governance (ESG)
Member of the Dow Jones Sustainability North America Index
Top 1% of global financial institutions for corporate governance (top 10% of banks overall)
Top 100: 2019 Bloomberg Gender-Equality Index and Thomson Reuters Diversity & Inclusion Index
One of the World’s Best Workplaces in 2018 by Great Place to Work
Scotia Global Asset Management is a signatory to the Principles for Responsible Investment
Business Line and
Financial Overview
Appendix 1:
18
Financial Performance Strong revenue and balance sheet growth
$MM, except EPS Q3/19 Y/Y Q/Q
Reported
Net Income $1,984 +2% (12%)
Diluted EPS $1.50 (3%) (13%)
Revenue $7,659 +7% (2%)
Expenses $4,209 +12% +4%
Productivity Ratio 55.0% +250bps +320bps
Core Banking Margin 2.45% (1bp) -
PCL Ratio1 48bps (21bps) (13bps)
PCL Ratio on Impaired Loans1 52bps +11bps +3bps
Adjusted2
Net Income $2,455 +9% +8%
Diluted EPS $1.88 +7% +11%
Revenue $7,965 +11% +4%
Expenses $4,122 +11% +3%
Productivity Ratio 51.7% (10bps) (60bps)
PCL Ratio1 48bps +8bps (3bps)
YEAR-OVER-YEAR HIGHLIGHTS
• Adjusted Net Income up 9%2
• Diluted EPS up 7%2
• Revenue up 11%2
o Excluding acquisitions and IFRS15, revenue was
up 5%
o Net interest income up 7%
o Non-interest income up 16%
• Expenses up 11%2
o Mostly driven by acquisitions
o Excluding acquisitions and the impact of IFRS15,
expenses were up 4%
• Strong deposit growth of 10% Y/Y,
asset growth of 13% Y/Y
• Total PCL ratio increased by 8 bps
o Impaired PCL ratio was up 11 bps
1 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures 2 Adjusted for Acquisition and divestiture-related amounts, including Day1 PCL impact on performing loans, integration and amortization costs related to current acquisitions, amortization of intangibles related to current and past acquisitions and losses/(gains) on divestitures and related costs
DIVIDENDS PER COMMON SHARE
0.82 0.85 0.85 0.87 0.87
0.03 0.02
0.03
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19Announced Dividend Increase
55%
27%
18%
60%
21%
17%
2%
• Improve productivity towards our <49% productivity ratio target (<45% ex Wealth) by 2020 supported by positive operating leverage
• Leverage data analytics for prudent growth in higher margin credit card and small business banking
• Increase core deposits and primary customers
• Canadian Banking provides a full suite of financial advice and banking solutions, supported by an excellent customer experience, to Retail, Small Business, Commercial Banking, and Wealth Management customers
19
Canadian Banking
Top 3 bank in personal & commercial banking, wealth and insurance in Canada
STRATEGIC OUTLOOK
REVENUE MIX1
Retail
Wealth
Commercial
Personal
Loans Business and
Government Loans
AVERAGE LOAN MIX1
$3.5B $351B
Residential
Mortgages
1 For the three months ended July 31, 2019; 2 3-5 year target; 3 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, and amortization of intangibles related to current and
past acquisitions; 4 Reflects adoption of new accounting standard, IFRS 15; 5 For the nine months ended July 31, 2019; 6 Attributable to equity holders of the Bank
Credit Cards
MEDIUM-TERM FINANCIAL OBJECTIVES
Target2 2019 Q3 YTD3,4.5
Net Income Growth6 7%+ +2%
Productivity Ratio <49% 49.4%
CB ex Wealth <45% 45.4%
Wealth <65% 61.6%
20
Canadian Banking Financial Performance Margin expansion, strong deposit growth, and expense management. Strong Wealth results.
1,174 1,141 1,146 1,089 1,062
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
2.46% 2.45% 2.44% 2.46%
2.49%
ADJUSTED NET INCOME1,3 ($MM) AND NIM (%)
• Adjusted Net Income up 3%3
o Lower real estate gains reduced net income by 2%
o Margin expansion
o Wealth Management results up 20%
• Revenue up 5%
o Net interest income up 5%
o Excluding M&A and IFRS 15, revenue was up 3%
• Loan growth of 4%
o Residential mortgages up 3%; credit cards up 7%
o Business loans up 10%
• Deposit growth of 10%
o Personal up 7%; Non-Personal up 17%
• NIM up 3 bps
o Primarily driven by the impact of prior rate increases
• Expenses up 4%3
o Investments in technology and regulatory initiatives
o Excluding M&A and IFRS15, expenses were up 1%
• Quarterly operating leverage of +1.1%3
• PCL ratio2 up 6 bps to 27 bps
FINANCIAL PERFORMANCE AND METRICS ($MM)1
YEAR-OVER-YEAR HIGHLIGHTS
1 Attributable to equity holders of the Bank 2 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures 3 Adjusted for Acquisition-related costs, including integration and amortization costs related to current acquisitions, and amortization of intangibles related to current and
past acquisitions
Q3/19 Y/Y Q/Q
Reported
Net Income $1,160 +3% +11%
Revenue $3,532 +5% +5%
Expenses $1,723 +4% +1%
PCLs $240 +33% (5%)
Productivity Ratio 48.8% (40bps) (180bps)
Net Interest Margin 2.49% +3bps +3bps
PCL Ratio2 0.27% +6bps (3bps)
PCL Ratio on Impaired Loans2 0.29% +8bps +1bp
Adjusted3
Net Income $1,174 +3% +11%
Expenses $1,705 +4% +1%
Productivity Ratio 48.3% (50bps) (170bps)
21
Canadian Banking: Retail Loan Portfolio High quality retail loan portfolio: ~92% secured
1 LTV calculated based on the total outstanding balance secured by the property. Property values indexed using Teranet HPI data. 2 Spot Balance as of July 31, 2019
DOMESTIC RETAIL LOAN
BOOK2
79%
3% Credit Cards
5% Unsecured
13% Automotive
Real Estate
Secured Lending
$295.3B
• High quality residential mortgage portfolio
o 40% insured; remaining 60% uninsured has a LTV of 55%1
• Market leader in auto loans
o $37.5 billion auto loan portfolio with 7 OEM relationships (3 exclusive)
o Prime Auto and Leases (~91%)
o Stable lending tenor with contractual terms for new originations averaging 77 months (6.4 years) with projected effective terms of 53 months (4.4 years)
• Growth opportunity in credit cards
o $7.7 billion credit card portfolio represents ~3% of domestic retail loan book and 1.3% of the Bank’s total loan book
o Organic growth strategy focused on payments and deepening customer relationships
o Upside potential from existing customers: ~80% of growth is from existing customers (penetration rate mid-30s and trending up versus peers in the low-40s)
o Strong risk management culture with specialized credit card teams, customer analytics and collections focus
$100.1
$30.7 $27.1 $14.5 $10.9 $8.8
$13.6
$10.2 $3.7
Ontario BC & Territories Alberta Quebec Atlantic Provinces Manitoba &Saskatchewan
22
Canadian Banking: Residential Mortgages High quality, diversified portfolio
1 LTV calculated based on the total outstanding balance secured by the property. Property values indexed using Teranet HPI data
2 New originations defined as newly originated uninsured residential mortgages and have equity lines of credit, which include mortgages for purchases refinances with a request for additional funds and transfer from other financial institutions
CANADIAN MORTGAGE PORTFOLIO: $222B (SPOT BALANCES AS AT Q3/19, $B)
% of
portfolio 51.1% 18.3% 13.9% 7.4% 5.0% 4.3%
$1.9 $0.2
$0.7
Freehold - $192B Condos - $30B $113.7
$40.9
$30.8
$16.4 $11.1 $9.5
40%
60% Uninsured
Total
Portfolio:
$222 billion
Insured
• Residential mortgage portfolio of $222 billion: 40% insured; LTV 55% on the uninsured book1
o Mortgage business model is “originate to hold”
o New originations2 in Q3/19 had average LTV of 64%
o Majority is freehold properties; condominiums represent approximately 13.5% of the portfolio
• Three distinct distribution channels: All adjudicated under the same standards
o 1. Broker (~64%); 2. Branch (~17%); and 3. Mobile Salesforce (~19%)
o eHOME: Since the launch of eHOME, we have had over 50,000 Canadians engage with the application to see how easy the digital mortgage experience can be. On average, customers are receiving a conditional approval is less than 24 hours (vs. multiple days in the traditional process)
23
Canadian Banking: Residential Mortgages (continued) High quality, diversified portfolio
4% 11% 12% 15%
58%
< 635 636 - 706 707 - 747 748 - 788 > 788
Q3/18 Q2/19 Q3/19
Canada
Total Originations ($B) 11.9 7.1 14.0
Uninsured LTV 63% 64% 64%
GTA
Total Originations ($B) 3.6 2.3 4.5
Uninsured LTV 62% 64% 63%
GVA
Total Originations ($B) 1.4 0.9 1.6
Uninsured LTV 60% 63% 61%
Average FICO® Score
Canada 789
GTA 791
GVA 795
FICO is a registered trademark of Fair Isaac Corporation 1 FICO ® distribution for Canadian uninsured portfolio based on score ranges at origination 2 Percentage is based on Total Mortgages
• Only <0.70% of uninsured portfolio2 has
a FICO® score of <620 and an LTV
>65%
• Canadian uninsured mortgage portfolio
is $133 billion as at Q3/2019
FICO® DISTRIBUTION – CANADIAN UNINSURED PORTFOLIO1
GTA
63%
ON
64%
QC
65%
Prairies 68%
GVA
61%
BC &
Territories
63%
Atlantic
Provinces
67%
NEW ORIGINATIONS UNINSURED LTV* DISTRIBUTION
*Average LTV ratios for our uninsured residential mortgages originated during the quarter
• Provide personal and commercial dealer financing solutions, in partnership with seven leading global automotive manufacturers in Canada
• Portfolio grew 3%1 year-over-year
o Personal up 4%, Commercial down 2%
24
Automotive Finance Canada’s leader in automotive finance
1 For the three months ended July 31, 2019; 2 Data as at Feb 2019; 3 CBA data, includes BMO, CIBC, HSBC, National Bank, RBC, Scotiabank, TD; 4 DealerTrack Portal data, includes all Near-Prime Retail providers on DealerTrack Portal, data for
July-19 originations; 5 Includes BMO, CIBC, RBC, Scotiabank, TD, HSBC, Canadian Western Bank, Laurentian Bank, data as of Dec-2018
37%
63%
Market Share2
24%
76%
28%
72%
Prime Retail Market Share3 Near-Prime Retail Market Share4 Commercial Floorplan Market Share5
Exclusive Relationships
Semi-Exclusive Relationships*
* 1 to 2 other financial institutions comprise Semi-Exclusive relationships
MAZDA VOLVO JAGUAR/LAND ROVER
HYUNDAI CHRYSLER TESLA GM 79%
8%
13%
AVERAGE ASSET MIX
$43.3B1
100% Secured
Commercial
Near-Prime Retail
Prime Retail
STRATEGIC FOCUS:
25
Canada’s #1 Digital Bank; The Official Bank of the 2019 NBA Champions and Toronto Raptors
• Simple, market-leading products that appeal to value-
conscious, self-directed and digitally-savvy Canadians
• Seamless digital client experience
Rapid Deployments:
Agile best practices enable
quick & efficient new product &
feature delivery.
Incubator:
Identify, explore, and pilot new
technologies and solutions to
meet evolving Client needs.
Scalable:
Nimble, low cost systems
provide a holistic client view.
Third-Party Recognition:
Tangerine ranks highest in customer
satisfaction among mid-sized banks
for 8th year in a row by J.D. Power
Modern Platform Speed & Agility Client-Driven Innovation Unique ‘Orange’ Culture Award Winning Approach
Team Tangerine:
Our unique culture and
lean team are an essential
part of how we deliver.
• Improved brand recognition through sponsorship of the
Toronto Raptors
• Deepening client relationships by introducing SCENE Loyalty,
the only entertainment royalty program in Canada
• 2.3 million customers
• Industry-leading customer service
• <7-minute account sign-up
• 97% digital transactions
• 96% digital onboarding
• 90% digital sales
• Enhanced self-service options, adding speed & agility
• Nimble, modern platform supporting rapid development cycles
• Low-cost, scalable business model
Simplicity
Velocity
Partnerships
• International Banking operates primarily in Latin America and the Caribbean with a full range of personal and commercial financial services. Its primary markets are the Pacific Alliance countries of Mexico, Peru, Chile and Colombia
26
International Banking Leading P&C banking operation in high quality growth markets in Latin America and the Caribbean
STRATEGIC OUTLOOK
MEDIUM-TERM FINANCIAL OBJECTIVES
70% 25%
5%
REVENUE1
$3.4B
Asia
C&CA Latin America
25% Mexico
25% Peru
26% Chile 16%
Colombia
8% Other Latin
America
50%
27%
16%
7%
LOAN MIX1
$155B Credit
Cards
Personal
Loans Residential
Mortgages
Business
Loans
• Positive earnings impact from acquisitions in Chile, Colombia, Peru and Dominican Republic
• Disposition of non-core operations in smaller Caribbean markets, Puerto Rico and El Salvador reduces operational risk
• Margins (NIM ~450 bps) and credit quality are expected to remain stable
• Positive operating leverage
Target2 2019 Q3 YTD3,4,5
Net Income Growth6 9%+ 15%
Productivity Ratio <51% 50.5%
Operating Leverage Positive +4.2%
1 For the 3 months ended July 31, 2019; 2 3-5 year target; 3 Adjusted for Acquisition-related costs, including Day 1 PCL impact on acquired performing loans, integration and amortization costs related to current acquisitions, and amortization of intangibles
related to current and past acquisitions; 4 Y/Y growth rates (%) are on a constant $ basis; 5 For the nine months ended July 31, 2019; 6 Attributable to equity holders of the Bank
92%
PAC
27
International Banking Financial Performance Double-digit earnings growth for 11 consecutive quarters
4.70% 4.52% 4.52% 4.58% 4.45%
Q3/19 Y/Y Q/Q Reported
Net Income $781 +40% 13%
Revenue $3,427 +20% 3%
Expenses $1,780 +19% 6%
PCLs $476 (35%) (23%)
Productivity Ratio 51.9% (100bps) +90bps
Net Interest Margin 4.45% (25bps) (13bps)
PCL Ratio3 1.24% (134bps) (47bps)
PCL Ratio on Impaired Loans3 1.36% +3bps +7bps
Adjusted5
Net Income $815 +11% +5%
Expenses $1,725 +18% +4%
PCLs $476 +33% +2%
Productivity Ratio 50.3% (140bps) +30bps
PCL Ratio3 1.24% +1bp (6bps)
715 746 805 787 815
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
YEAR-OVER-YEAR HIGHLIGHTS2
• Adjusted Net Income up 14%5 or 11%5 on a
constant currency basis
o Strong loan growth across the Pacific Alliance, positive
impact of acquisitions, and higher non-interest income
• Revenues up 20%
o Pacific Alliance up 26% (including acquisitions)
• Loans up 28%
o Pacific Alliance up 41% (including acquisitions)
• NIM down 25 bps
o Primarily driven by larger contribution from Chile and
margin compression in Mexico
• Expenses up 18%5
o Includes impact of acquisitions
o Business volume growth and inflation
o Productivity ratio improvement of 140 bps5
• Quarterly operating leverage of +3.2%5
• PCL ratio on impaired loans3 increased 3
bps 1 Attributable to equity holders of the Bank 2 Y/Y and Q/Q growth rates (%) are on a constant dollars basis, while metrics and change in bps are on a reported basis 3 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures 4 Net Interest Margin is on a reported basis 5 Adjusted for Acquisition-related costs, including Day 1 PCL impact on acquired performing loans, integration and amortization costs related to current acquisitions, and
amortization of intangibles related to current and past acquisitions
ADJUSTED NET INCOME1,5
($MM) AND NIM4 (%)
FINANCIAL PERFORMANCE AND METRICS ($MM)1, 2
28
Scotiabank in the Pacific Alliance Countries Well positioned in high quality, growth markets
1 Source: World Bank 2017 2 Source: The World Factbook, CIA 2017
3 Sovereign ratings from Moody’s, S&P, and Fitch; Source: Bloomberg
4 Source: United Nation Conference on Trade and Development (UNCTAD) 2017; Organization for Economic Co- operation and Development (OECD) 2016 5 Ranking based on publicly traded banks by total loans market share as of June, 2019, inc. M&A 6 For the three months ended July 31, 2019
7 For the trailing 12 months ended July 31, 2019 not adjusted for currency
8 Earnings adjusted for acquisition –related costs including integration and amortization costs related to current acquisitions, and amortization of intangibles related to current and past acquisitions 9 Employees are reported on a full-time equivalent basis 10As of July 31, 2019
Mexico Peru Chile Colombia
Scotiabank Market Share5 7.4% 18.3% 14.0% 6.0%
Market Share Ranking5 6th 3rd 3rd 6th
Strengths Auto and Mortgages P&C and Mortgages Credit Cards, Mortgages Credit Cards, Personal
Average Total Loans6(C$B) $31.3 $21.5 $47.2 $12.2
Revenue7(C$B) $2.3 $2.3 $2.4 $1.6
Net Income after NCI7,8(C$MM) $611 $756 $539 $132
ROE6,8 18% 24% 10% 9%
# of Employees9,10 13,241 12,052 8,967 8,955
PAC Highlights
• 230 million people1, median age of 302
• 9th largest economy in the world1
• Banking penetration <50%1
• Sovereign ratings all “Investment Grade”3
• 63% of exports related to manufacturing4
• Largest trading partner is the United States4
Scotiabank in the PAC
• Only global bank present in all PAC countries
• Top 3 bank in Chile and Peru
• 28-year operating history (average)
• 2018 “Bank of the Year”, Latin Finance
45%
41%
8%
5%
GEOGRAPHIC REVENUE1
$1.1B
• Full-service wholesale bank in Canada, the United States and Latin America. Offers a range of products and services in select markets in Europe, Asia and Australia.
29
Global Banking and Markets Second-largest Canadian wholesale banking and capital markets business
STRATEGIC OUTLOOK
Europe
Canada
US
Asia 32%
27%
12%
9%
20% TRADING RELATED
REVENUE (TEB)1,2
$549MM
Commodities
Interest Rate
& Credit Foreign
Exchange
Equities
55%
28%
17% REVENUE
BY BUSINESS LINE1
$1.1B
Business Banking
FICC
Global Equities
• Up-tiering lending relationships, expanding Investment Banking capabilities in key markets, and increasing investment in the Pacific Alliance to become a leader in local and cross-border banking and capital markets
• Continued strong growth in deposits, improved corporate lending and investment banking results to absorb required regulatory and technology investments
1 For the 3 months ended July 31, 2019; 2 All-Bank trading-related revenue
Other
30
Global Banking and Markets Financial Performance Volatile market conditions, margin compression. Strong loan growth.
441 416
335
420 374
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
FINANCIAL PERFORMANCE AND METRICS1 ($MM) YEAR-OVER-YEAR HIGHLIGHTS
• Net Income down 15% Y/Y and down 11% Q/Q
• Revenue down 2%
o Net interest income down 8%
o Non-interest income flat
• NIM down 21 bps
o Lower deposit margins
• Loans up 12%
o Strong corporate loan growth across Canada and the
U.S.
• Expenses up 9%
o Expenses flat Q/Q
o Higher regulatory costs and unfavourable impact of
foreign currency
• PCL ratio2 continues to be a recovery
1 Attributable to equity holders of the Bank 2 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures
NET INCOME1 AND ROE
Q3/19 Y/Y Q/Q
Net Income $374 (15%) (11%)
Revenue $1,084 (2%) (6%)
Expenses $593 +9% -
PCLs ($4) N/A N/A
Productivity Ratio 54.7% +580bps +310bps
Net Interest Margin 1.61% (21bps) (9bps)
PCL Ratio2 (0.01%) +4bps +1bp
PCL Ratio on Impaired Loans2 (0.01%) +5bps +1bp
15.6% 15.3%
11.5%
15.2% 12.8%
31
Credit Performance by Business Lines Credit fundamentals remain strong
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
(As a % of
Average Net Loans &
Acceptances)
PCLs on
Impaired
Loans
Total
PCLs
(adj.)
PCLs on
Impaired
Loans
Total
PCLs
PCLs on
Impaired
Loans
Total
PCLs
PCLs on
Impaired
Loans
Total
PCLs
(adj.)
PCLs on
Impaired
Loans
Total
PCLs
Canadian Banking
Retail 0.25 0.24 0.25 0.25 0.28 0.28 0.31 0.35 0.33 0.30
Commercial (0.04) 0.06 0.06 0.15 0.21 0.231 0.09 0.061 0.10 0.161
Total 0.21 0.21 0.22 0.23 0.27 0.271 0.28 0.301 0.29 0.271
International Banking
Retail 2.36 2.252 2.38 2.21 2.33 2.36 2.36 2.352 2.48 2.28
Commercial 0.38 0.312 0.07 (0.06)1 0.19 0.261 0.27 0.301, 2 0.30 0.261
Total 1.33 1.232 1.20 1.051 1.23 1.281 1.29 1.301, 2 1.36 1.241
Global Banking and Markets (0.06) (0.05) (0.07) (0.09)1 (0.01) (0.07) (0.02) (0.02) (0.01) (0.01)
All Bank 0.41 0.40 0.42 0.39 0.47 0.47 0.49 0.51 0.52 0.48
1 Excludes provision for credit losses on debt securities and deposit with banks 2 On an adjusted basis; adjusted for Day 1 PCLs from acquisitions
32
Historical PCL Ratios on Impaired Loans Credit fundamentals remain strong; PCLs on impaired loans in line with long-term average
1 Provision for credit losses on certain assets – loans, acceptances and off-balance sheet exposures
ALL BANK HISTORICAL PCL RATIO ON IMPAIRED LOANS1
CANADIAN BANKING HISTORICAL PCL RATIO ON IMPAIRED LOANS1
Average: 26 bps
0.00%
0.50%
1.00%
1.50%
2.00%
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9Y
TD
PCL Ratio on Impaired Loans Historical Average - PCL Ratio on Impaired Loans (26 bps)
0.00%
0.50%
1.00%
1.50%
2.00%
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9 Y
TD
PCL Ratio on Impaired Loans Historical Average - PCL Ratio on Impaired Loans (44 bps)
2009: Higher PCLs
driven by economic
conditions, event
distributed across
business lines. Higher
general allowance and
sectoral allowance
(automotive related)
Average: 44 bps
2002: Included $454
million related to the
Bank’s exposure to
Argentina
33
Canadian Retail: Loans and Provisions Credit fundamentals remain strong
1 96% are automotive loans 2 Includes Home Equity Lines of Credit and Unsecured Lines of Credit
3 Includes Tangerine balances of $6 billion 4 80% secured by real estate; 13% secured by automotive
MORTGAGES PERSONAL LOANS1
LINES OF CREDIT2 CREDIT CARDS
Loan Balances
Q3/19 Mortgages Personal Loans1 Lines of Credit2 Credit Cards Total
Spot ($B) $222 $40 $34 $8 $3043
% Secured 100% 99% 62% 3% 93%4
1 1 1 2 1 0 0 2 1 1
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
63 69 69
88 78
66 70
80 95
85
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
70 68 75 70
96
75 68 81 86
73
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
330
283
349 415
402
269
292
241
458
339
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
PCL as a % of avg. net loans (bps) PCLs on Impaired Loans as a % of avg. net loans (bps)
TOTAL RETAIL
25
25 28 31
33
24
25 28
35
30
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
34
International Retail: Loans and Provisions Credit fundamentals remain strong
1Adjusted for acquisition-related costs, including Day 1 PCL impact on acquired performing loans 2Total includes other smaller portfolios
TOTAL RETAIL2 MEXICO
CHILE
PERU
154
206 199 218
208
169
216 233 231
203
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
Loan Balances
Q3/19 Mexico Peru Chile Colombia C&CA Total
Spot ($B) $13 $10 $26 $7 $19 $76
COLOMBIA
236 238
233 236
248
225 221
236 235
228
Q3/18 Q4/18 Q1/19 Q2/19 Q3/191 1
182
145
120
148 150 165
134
155 159 155
Q3/18 Q4/18 Q1/19 Q2/19 Q3/191
443
400
517
372
545
421
432
364
402 491
Q3/18 Q4/18 Q1/19 Q2/19 Q3/191
452
582 554 549 531
425 532 485 455
377
Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
PCL as a % of avg. net loans (bps) PCLs on Impaired Loans as a % of avg. net loans (bps)
1
CARIBBEAN &
CENTRAL AMERICA
151 147
138 156
138 126 101
170 157 141
Q3/18 Q4/18 Q1/19 Q2/19 Q3/191
35
Wholesale Funding Wholesale funding diversity by instrument and maturity1,6,7
$246B
1 Excludes repo transactions and bankers acceptances, which are disclosed in the contractual maturities table in the MD&A of the Interim Consolidated Financial Statements. Amounts are based on remaining term to maturity. 2 Only includes commercial bank deposits raised by Group Treasury. 3 Excludes asset-backed commercial paper (ABCP) issued by certain ABCP conduits that are not consolidated for financial reporting purposes. 4 Represents residential mortgages funded through Canadian Federal Government agency sponsored programs. Funding accessed through such programs does not impact the funding capacity of the Bank in its own name. 5 Although subordinated debentures are a component of regulatory capital, they are included in this table in accordance with EDTF recommended disclosures. 6 As per Wholesale Funding Sources Table in MD&A, as of Q3/19. 7 May not add to 100% due to rounding.
35%
10% Mortgage
Securitization4
Bearer Deposit Notes, Commercial Paper &
Short-Term Certificate of Deposits
2%
Asset-Backed Commercial Paper3
30% Senior Notes
11% Covered Bonds
4% Subordinated Debt5
$18 $18
$11 $12
$8
$14
$1
$1
$6 $3
$7 $4
$4
$2
< 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years >
MATURITY TABLE (EX-SUB DEBT)
(CANADIAN DOLLAR EQUIVALENT, $B)
Senior Debt ABS Covered Bonds
$25 $25
$19
$16
$12
$16
$4
3% Bail-inable Notes
3% Asset-Backed
Securities
2% Deposits from Banks2
Key Market Profiles
Appendix 2:
37
Economic Outlook in Key Markets Growth in Pacific Alliance expected to remain above that of Canada and the U.S.
2019 AND 2020 REAL GDP GROWTH FORECAST (%)
Source: Scotiabank Economics. Forecasts as of July 12, 2019.
Real GDP (Annual % Change)
Country 2000–17 avg. 2018 2019f 2020f
Mexico 2.2 2.0 0.9 1.1
Peru 5.0 3.9 3.1 3.7
Chile 3.9 4.0 3.2 3.2
Colombia 3.9 2.6 3.2 3.6
PACs simple avg. 3.7 3.1 2.6 2.9
2000–17 avg. 2018 2019f 2020f
Canada 2.1 1.9 1.4 2.0
U.S. 2.0 2.9 2.5 1.6
38
Mexico Diverse economy with a strong balance sheet
Top 5 Trading Partners
MEXICAN GDP BY INDUSTRY
(Q2 2019)
6.5%
5.8% 16.0%
6.1%
6.8% 3.8%
2.0%
16.2%
17.7%
15.9%
Finance, Insurance, & Real Estate
Health & Education
Wholesale & Retail Trade
Manufacturing
Mining and Oil & Gas Extraction
Construction
Public
Administration
Professional, Scientific,
& Technical Services
Transportation & Warehousing
Other
3.2% Natural
Resources
• The Mexican economy reflects a solid mix of commodities, goods production, and services
• Trade remains dominated by the U.S., but Mexico’s diversification agenda is underpinned by 13 free-trade agreements with 47 countries that account for 40% of global GDP
United
States
59%
Others
20% Germany 3%
Japan 3%
Canada
4%
China
11% -5
-4
-3
-2
-1
0
1
2
3
4
5
16 17 18 19
Other*Net ExportsInventoriesInvestmentGovernmentConsumptionReal GDP
Contributions to Mexican GDP Growth
y/y % change
*Statistical discrepancy, subject to revision.Sources: Scotiabank Economics, Haver Analytics.
39
Chile Advanced economy with wide-ranging trade links
CHILEAN GDP BY INDUSTRY
(Mar 2019) 2.0%
9.3% 15.2%
6.3%
4.6% 19.1%
8.5%
8.7% 10.2%
12.7%
Finance, Insurance, & Real Estate
Wholesale & Retail Trade
Manufacturing
Mining and Oil &
Gas Extraction
Construction
Public Administration
Housing &
Personal Services
Transportation & Warehousing
Restaurants & Hotels
Other
3.4% Natural Resources
Top 5 Trading Partners
United
States
16%
Others
38%
Brazil
7%
Japan
6%
South Korea
4%
China
29%
• Chile’s mix of economic activities reflects its status as an advanced market economy
• Chile’s diversified trading relationships are supported by 22 free-trade agreements with 59 countries that account for 70% of global GDP
• Investment has been a strong contributor to growth in Chile over the past year, which should underpin future productivity gains
-6
-4
-2
0
2
4
6
8
16 17 18 19
Net ExportsInventoriesInvestmentGovernmentConsumptionReal GDP
Contributions to Chilean GDP Growth
y/y % change
Sources: Scotiabank Economics, Haver Analytics.
40
Peru Resilient economic fundamentals
PERUVIAN GDP BY
INDUSTRY (Q1 2019)
10.2%
14.1% 31.9%
20.8%
5.5%
Finance, Insurance, & Real Estate
Transportation, Information & Commerce
Construction
Mining & Energy Other
12.4% Manufacturing
5.1% Natural
Resources
Top 5 Trading Partners
United
States
20%
Others
34%
Brazil
5%
Spain
4%
South
Korea 5%
China
31%
• Peru’s important resource sectors are increasingly balanced by stronger service-sector activity and solid economic fundamentals
• Peru has 16 free-trade agreements with 49 countries that account for 66% of global GDP
• Investment is making a consistently strong contribution to GDP, which should make higher growth rates more sustainable in the future
-6
-4
-2
0
2
4
6
8
16 17 18 19
Net ExportsInventoriesInvestmentGovernmentConsumptionReal GDP
Contributions to Peruvian GDP Growth
y/y % change
Sources: Scotiabank Economics, Haver Analytics.
41
Colombia Gaining momentum
COLOMBIAN GDP BY
INDUSTRY (Q1 2019)
6.2%
17.4% 13.6%
6.7%
14.7%
7.2% 2.9%
8.7% 11.9%
8.2%
Finance, Insurance, & Real Estate
Wholesale, Retail Trade, Accommodation & Food
Services
Manufacturing
Construction
Mining and Oil & Gas Extraction
Public Administration
Professional,
Scientific,
& Technical
Services
Information & Communication
Natural Resources
Other
2.4% Arts &
Entertainment
Top 5 Trading Partners
Germany
3%
United
States
35%
Others
27%
Brazil
6%
Mexico
8%
China
21%
• Services account for a rising share of Colombian GDP compared with traditional strengths in extractive industries
• Colombia continues to build on its 10 free-trade agreements with 42 countries that account for 38% of global GDP
• Rising consumption, supported by public spending, reflects an expanding middle class as growth gains momentum and converges toward the economy’s underlying potential
-4
-2
0
2
4
6
8
16 17 18 19
Other*Net ExportsInvestmentGovernmentConsumptionReal GDP
Contributions to Colombian GDP Growth
y/y % change
*Statistical discrepancy, subject to revision.Sources: Scotiabank Economics, Haver Analytics.
42
Other Regions
Strong contribution from leading Caribbean & Central American franchise
• Caribbean & Central America
o 16 countries contributing ~ CAD $700MM in earnings in 2018
o Well-established, diversified franchise that serves retail, commercial and corporate customers
o Actively managing footprint to ensure scale in larger growth markets and reduce risk profile:
o Announced sale of operations in 9 smaller countries in Caribbean in Q1/19
o Completed acquisition of Banco Dominicano del Progreso in Q2/19. Doubles customer base and creates 4th largest bank
o Completed sale of pension and insurance operations in the Dominican Republic in Q2/19
o Announced sale of banking and insurance operations in El Salvador in Q2/19
o Announced sale of Announces the sale of operations in Puerto Rico and the U.S. Virgin Islands in Q3/19
o Recognized by Global Finance magazine as:
o “Best Bank Award 2017” in the Bahamas, Barbados, Costa Rica, Turks & Caicos and U.S. Virgin Islands;
o “World’s Best Consumer Digital Bank 2017” in 24 countries across Latin America and the Caribbean; and
o “Best in Mobile Banking” in the Caribbean region
• Asia
o Thailand: 49% interest in Thanachart Bank (“TBank”) (2007)
o Announced definitive agreement to reduce investments in Thailand in Q3/19, resulting in Scotiabank owning approximately 6% of a Merged Bank (among ING Groep, TBank and TMB)
o CAD $3.0B carrying value as of October 31, 2018
o CAD $590MM of net income for twelve months ended October 31, 2018
o China: 19.9% interest in Bank of Xi’an (2009)
o CAD $1.2B market value as of Q2/19
o CAD $772MM carrying value as of October 31, 2018
o CAD $456MM of net income for twelve months ended October 31, 2018
Canadian Housing Market
Appendix 3:
Canadian Housing Market
Engineered moderation of price and volume
1 Sources for charts and table: Bank of Canada Financial System Review 2019 (Data as of December 31, 2018); CREA; MLS Home Price Index growth rates reported as non seasonally-adjusted y/y (Data as of July 2019)
Volume of Home Sales Near 10-Year Average*
*Seasonally adjusted *Actual – not seasonally adjusted
Canada’s Five Largest Metropolitan Areas*
*Actual – not seasonally adjusted
44
Significant Moderation in Price Growth*
0
5
10
15
20
25
Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18
High-ratio mortgages Low-ratio mortgages Total mortgages
Decline in Share of High Risk Mortgages
% Share of new mortgages with a loan-to-income
ratio greater than 450%
Source: Bank of Canada Financial System Review 2019
Mortgage
insurance
rules
tightened
Guideline
B-20
revised
-10
-5
0
5
10
15
20
25
06 07 08 09 10 11 12 13 14 15 16 17 18 19
Sources: Scotiabank Economics, CREA.
Aggregate Composite MLS Home Price Index Y/Y Percentage Change
20
25
30
35
40
45
50
07 08 09 10 11 12 13 14 15 16 17 18 19
Sources: Scotiabank Economics, CREA.
Units, 000s
10-year monthly moving avg.
Monthly home sales
-15
-10
-5
0
5
10
GTA GVA Montreal Calgary Edmonton
Sources: Scotiabank Economics, CREA.
MLS Home Price Index Benchmark Price Y/Y Percentage Change
4.43
-9.41
7.29
-3.49 -3.21
Average-0.88
Canadian Housing Market
45
Engineering a “soft landing”
• Canada: Positive sales and price momentum returning after multiple years of policy-induced slowdown:
o In July 2019, national-level home sales rose a healthy +3.5% m/m1 – the fifth consecutive monthly increase
o Average sales prices and the composite MLS Home Price Index2 are trending higher (top chart)
o Sales-to-new listings ratio climbed to 59.8% in July 2019. While still indicative of balanced supply-demand conditions, the ratio was at its highest point since January 2018
• Greater Toronto: Recovery in sales volumes. Market is largely balanced
• Greater Vancouver: Recovery less established. Sales activity has risen by more than 20% in two of the past three months. Home purchases are trending moderately higher in other Southern BC centers
Toronto & Vancouver Home Sales
1 Sales and listings figures reported in seasonally-adjusted m/m terms, while MLS HPI growth rates reported as non-seasonally-adjusted y/y 2 Measure of real estate price appreciation that removes distortions related to variations in the mix of sales across unit types 3 Sources for charts and table: Scotiabank Economics, CREA.
Canada Jun-19 Jul-19 Jul-19
m/m* m/m* y/y**
Sales (% change) 0.6 3.5 7.4
New listings (% change) 0.7 -0.4 -1.0
Average price (% change) 1.7 2.6 3.5
Jun-19 Jul-19
Sales-to-new listings ratio (level)* 57.6 59.9
Months inventory (level)* 5.0 4.7
*Seasonally adjusted **Not seasonally adjusted
0
20
40
60
80
100
120
140
10 11 12 13 14 15 16 17 18 19
Actual
10-year avg.
home sales, 000s of unitsannualized, SA Greater Toronto
Greater Vancouver
-5
0
5
10
15
20
16 17 18 19
Single Family
Townhouse
Apartment
Composite
MLS Home Price Index, aggregate, y/y % change
Price Growth by Dwelling Type
Price Growth by Dwelling Type
46
Canadian Household Credit Public policy changes have moderated growth in household credit
• Total household credit grew at +3.5% annually in nominal terms in Q2/19 vs 2008 peak of +12.2% annually
• Consumer loans excluding mortgages (cards, HELOCs, unsecured lines, auto loans, etc.) grew at +3.4% annually in Q2/19 vs > 5% in late 2017
• Mortgage credit grew at +3.5% annually in Q2/19 vs 2008 peak of 13%
HOUSEHOLD CREDIT GROWTH CONSUMER LOAN GROWTH RESIDENTIAL MORTGAGE GROWTH
-5
0
5
10
15
20
25
00 02 04 06 08 10 12 14 16 18
%, 3-month moving average
y/y % change
Sources: Scotiabank Economics, Bank of Canada.
m/m % change,
SA
-5
0
5
10
15
20
25
00 02 04 06 08 10 12 14 16 18
%, 3-month moving average
m/m % change, SA
Sources: Scotiabank Economics, Bank of Canada.
y/y % change
-5
0
5
10
15
20
25
00 02 04 06 08 10 12 14 16 18
%, 3-month moving average
y/y % change
Sources: Scotiabank Economics, Bank of Canada.
m/m % change,
SA
47
Household Debt: Canada vs. U.S. Canadian households’ balance sheets compare favourably to US
• Canadian headline debt-to-income ratio is now ~ -4% vs. the U.S. peak in 2008
o Calculated on the same terms, Canada’s debt-to-income is currently 165% vs 131% in the U.S.
• Canadian debt-to-asset ratio remains below U.S.
o U.S. households have incentive to pursue higher asset leverage in light of mortgage-interest deductibility
• Ratio of total household debt-to-GDP remains lower in Canada than U.S.
o Calculated on a comparable basis, the ratio of household credit market debt is 99.5% in Canada vs 100.8% in the U.S.
Household Credit-Market Debt to Disposable Income
Total Household Liabilities As % of Total Assets
Household Credit-Market Debt to GDP
165.4
173.0
131.4
90
100
110
120
130
140
150
160
170
180
00 02 04 06 08 10 12 14 16 18
Adjusted Canadian*
Official Canadian
Official US
* Adjusted for US concepts and definitions. Sources: Scotiabank Economics, BEA, Federal Reserve Board, Statistics Canada.
household credit liabilities as % of disposable income
17.0
18.3
10
15
20
25
30
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
US
Canada
household debt as % of assets
Sources: Scotiabank Economics, Federal Reserve Board, Statistics Canada.
100.8
99.5
103.0
74.0
50
60
70
80
90
100
110
120
130
00 02 04 06 08 10 12 14 16 18
% of GDP
* Adjusted for US concepts and definitions. Sources: Scotiabank Economics, BEA, Federal Reserve Board, Statistics Canada.
Canada*
US with unincorporatedbusiness debt
Original US
Original Canada
48
Housing Market Differences vs U.S. Canada’s housing market features distinct practices and policies
Canada U.S.
Regulation and
Taxation
• Mortgage interest not tax deductible • Full recourse against borrowers in most provinces • Foreclosure on non-performing mortgages, no stay periods
Insurance
• Mandatory default insurance mortgages with LTV > 80% o CMHC backed by Government of Canada (AAA). Private insurers
are 90% government backed o Insurance available for homes up to CAD 1 mn o Premium is payable upfront o Covers full amount for life of mortgage
• Homebuyers must qualify for mortgage insurance at an interest rate that is the greater of their contract mortgage rate or the Bank of Canada's conventional five-year fixed posted rate
• Re-financing cap of 80% LTV on non-insured mortgages
Amortization
• Maximum 25-year amortization on mortgages with LTV > 80% • Maximum 30-year amortization on conventional mortgages • Down payment of > 20% required for non-owner
occupied properties
• Tax-deductible mortgage interest creates incentive to borrow and delay repayment
• Lenders have limited recourse in most states
• 90-day to 1-year stay period to foreclose on non-performing mortgages
• No regulatory LTV limit • Private insurers are not
government backed
Product
• Conservative product offerings, fixed or variable rate options • Much less reliance upon securitization and wholesale funding • Asset-backed securities not subjected to US-style off-balance sheet
leverage via special purpose vehicles
• Can include exotic products (e.g. adjustable rate mortgages, interest only)
Underwriting • Terms usually three or five years, renewable at maturity • Extensive documentation and strong standards
• 30-year term most common • Wide range of documentation
and underwriting requirements
Housing Policy Developments in Canada Consistent policy initiatives to maintain a balanced and sustainable market
49
2018
• Canada: OSFI imposes more stringent stress tests for uninsured mortgages, including a minimum qualifying rate at the greater of the five-year fixed posted rate or the contractual rate plus 200 bps, effective January 1, 2018
• Ontario: Elimination of rent control on new rental units first occupied on or before November 1, 2018
• British Columbia: Extension of the Property Transfer Tax on non-resident buyers. Investment of more than CAD 1.6 bn through FY2021 toward the goal of building 114,000 affordable housing units in the next 10 years
2017
• Ontario: 16 measures aimed to slow rate of house price appreciation
Key aspects include:
o 15% non-resident speculation tax
o Expanded rent control to all private rental units in Ontario
o Vacant home tax
o CAD 125 mn five-year program to encourage construction of new rental apartment buildings
2016
• Canada: Qualifying stress rate for all new mortgage insurance must be the greater of the contract mortgage rate or the Bank of Canada's conventional five-year fixed posted rate
• Low-ratio mortgage insurance eligibility requirements updated for lenders wishing to use portfolio insurance:
o Maximum amortization 25 years
o CAD 1 mn max. purchase price
o Minimum credit score of 600
o Owner-occupied property
• Elimination of primary residence tax exemption for foreign buyers
• Min. down payment on insured increased from 5% to 10% (for homes CAD 0.5‒1.0 mn)
• British Columbia: 15% land transfer tax on non-resident purchases in Metro Vancouver introduced
2019
• British Columbia: Increase in speculation tax on foreign and domestic home owners who do not pay income tax in BC from 0.5% of a property’s assessed value to 2%; additional school tax levied on portion of a property’s value that exceeds CAD 3 mn.
• Ontario: Measures to increase supply of available housing
Key aspects include:
o Greater authority over land use planning decisions for the province’s independent municipal dispute resolution body
o Reduced red tape on new residential developments
o Updated zoning regulations to facilitate building of affordable homes near transit
Additional Information
Appendix 4:
51
Additional Information
• Toronto Stock Exchange (TSX: BNS)
• New York Stock Exchange (NYSE: BNS)
Moody's
Investors
Services
Standard &
Poor's Fitch Ratings
Dominion Bond
Rating Service
Ltd.
Legacy Senior Debt1 Aa2 A+ AA- AA
Senior Debt2 A2 A- AA- AA (low)
Subordinated Debt (NVCC) Baa1 BBB+ - A (low)
Short Term Deposits/Commercial Paper P-1 A-1 F1+ R-1 (high)
Covered Bond Program Aaa Not Rated AAA AAA
Outlook Stable Stable Stable Stable
Scotiabank Credit Ratings
• CUSIP: 064149107
• ISIN: CA0641491075
• FIGI: BBG000BXSXH3
• NAICS: 522110
Scotiabank Listings: Scotiabank Common Share Issue Information:
For further information, please contact: www.scotiabank.com/investorrelations
1 Includes: (a) Senior debt issued prior to September 23, 2018; and (b) Senior debt issued on or after September 23, 2018 which is excluded from the bank recapitalization "bail-in" regime 2 Subject to conversion under the bank recapitalization "bail-in" regime
Energy Exposure
Appendix 5:
53
Energy Exposure1
High quality energy portfolio, reduced exposure from 3.1% of total loans in Q4/16 to 2.7%
0.8
7.2
0.4
0.7
2.9
0.7 3.3
• Energy portfolio represents 2.7% of loans outstanding, down from 3.1% in Q4/16
• 55% is rated Investment Grade (IG)
• “Watch-list” reduced to less than 2.5% of total exposures from 14% since Q4/16
• RWA has decreased 21% since Q4/16
1 As of July 31, 2019 2 May not add due to rounding
Energy
Exposure by
Geography2
$16.2B (%IG)
Mexico (37%)
Canada (63%)
Latin
America
(51%)
U.S. (39%)
Asia (93%)
Europe (47%)
C&CA
(39%)
Loans and
Acceptances
Outstanding ($B)
% of Total
Energy
Exposure
% of Total Loans
and Acceptances
Outstanding
% Investment
Grade
Total Exploration and Production 6.6 41% 1.1% 59%
Canadian E&P 3.7 23% 0.6% 77%
WCS Exposure 2.9 18% 0.5% 36%
Midstream 5.5 34% 0.9% 52%
Services 1.5 9% 0.2% 19%
Downstream 2.5 15% 0.4% 71%
Total Energy Exposure2 16.2 100% 2.7% 55%
54
Contact Information
Investor Relations
Philip Smith
Senior Vice President 416-863-2866
Lemar Persaud
Director 416-866-6124
Michael Lomas
Managing Director
Treasury Sales and Market Development
416-866-5734
Judy Lai
Director 416-775-0485
For further information, please contact: www.scotiabank.com/investorrelations
Steven Hung
Vice President 416-933-8774
Tiffany Sun
Manager 416-866-2870
